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History of Europe 1 HISTORY Subject : History (For under graduate student) Paper No. : Paper-VI History of Modern Europe Unit No. & Title : Unit-3 Europe between 1914 & 1945 Lecture No. & Title : Lecture-7 Europe 1925 – 1935: World Economic Depression FAQs 1. Which two features of economic liberalism ended with the Great Depression? The Great Depression marked the end of free trade, which gradually gave way to protectionist economies. Secondly the practice of valuing currencies against gold standards came to a close. History of Europe 2. 2 What was the status of the American economy after the Great War? At the end of the Great War the United States emerged as the world’s largest economic power. It was the largest industrial power as also one of the world’s largest agricultural exporters. 3. What initiated the consumer durable boom in America? When the Great War ended, the demand generated by the war subsided but agricultural production in the United States was not curtailed proportionately. Surplus agricultural products were available in the market and food prices began to slump. With falling food prices there was increase of disposable income and the American consumer began to enter the market and generate a consumer boom. 4. How did the consumer boom in the United States affect the agriculturalists? As agricultural prices kept going down, the agriculturists who had borrowed in order to invest History of Europe 3 either in agricultural production or for the purchase of consumer durables began to find it difficult to service their debts. This led to a credit squeeze and the availability of easy credit declined thereby affecting the agriculturists adversely. 5. What were the two ways in which American capital was invested in Europe? Investment made by the American private and public sector units in the European banks, came in two forms: 1) capital that was invested by the Americans was simply left in the European central banks to give up the feeling of security deposit growing up, so that the bank would be able to lend for industrial recovery. 2) American bankers chose to go for direct investment in industrial ventures which were invested for long term. 6. What was the significance of the Hawley-Smoot Tariff Act? The Hawley Smoot Tariff Act 1934 sponsored by United States Senator Reed Smoot and Representative Willis C Hawley raised United States tariffs on over twenty History of Europe 4 thousand imported goods to almost sixty per cent. At first there was some amount of success as factory payrolls, and industrial production increased appreciably. But in the long run the consequences proved to be unfavourable as it brought retaliatory tariff acts by other countries and the American trade started suffering a decline thereby intensifying the economic depression. 7. What was the economic fallout of the Depression? The economic fallout of the burgeoning economic nationalism. Depression was a Following the lead given by the Hawley-Smoot Act in USA, most of the countries had thrown up high tariff barriers to protect their own industries. Europe now witnessed a period of trade war within itself as also with the rest of the world. This was the first phase of the end of free trade principles, culminating in the Import Duties Act of 1932 in Britain, which had been the bastion of the free trade doctrine in the 19th century History of Europe 8. What 5 was the significance of the Hoover Moratorium? The Hoover Moratorium declared by President Hoover in July 1931 froze obligations of all nations to the USA for a year. This moratorium was directed by US interests, since bankrupt states could not clear debts. It was nevertheless a bold acknowledgement of the linkage between war-debts and Europe's financial instability. France agreed to stoppage of German reparations for the first time on condition of payment of interest on the payment thus deferred. 9. Why were the London Naval Conferences of 1931 and 1933 convened? In the 1930’s the general idea was that the solution to the economic crisis lay in a balanced budget. In order to do so it was realized that military spending ought to be curtailed. This was the reason for convening the London Naval Conferences. It was agreed at these meetings that all offensive armaments had to be foregone, History of Europe 6 10. Why was the Pound Sterling taken off the gold standard? The Pound Sterling was taken off the gold standard due to the conviction, that if the value of Pound fell, British goods would become cheaper and competitive in comparison with any other economies that it would be dealing with.